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German government rejects GM request for aid for Opel

The German government will not provide General Motors with the 1.1 billion euros in loan guarantees it requested for its struggling subsidiary, said Economics Minister Rainer Bruederle on Wednesday.

While Opel is still struggling, GM is posting profits

General Motors will have to rehabilitate its struggling German subsidiary Opel on its own. The German government has turned down the American automaker's application for 1.1 billion euros ($1.3 billion) in state loan guarantees, according to Rainer Bruederle, Germany's economics minister.

"I am confident that Opel has a good future without credit guarantees," Bruederle told reporters after a government committee deadlocked over the issue and asked Bruederle to make the decision.

GM rejected an offer from Berlin last November to lend Opel 4.5 billion euros if it sold the subsidiary to a new owner. It then demanded the loan guarantees from a fund set up to help companies hit hard by the recession.

As GM returned to profitability, however, and the German government announced new austerity measures, the rejection of the loan application had come to be expected.

Berlin says GM has enough cash reserves

In the end, the decision was left to Bruederle

GM posted profits for the first three months of 2010, its first gains in three years, after declaring bankruptcy last year. Bruederle said GM has cash reserves of at least 10 billion euros and was fully capable of restructuring the loss-making Opel on its own.

The Opel unit makes mid-priced cars mainly for the European market and has plants in four German states. The company employs roughly 24,000 people in Germany.

Other car companies had contended the loans would have been unfair. But Opel works council head Klaus Franz slammed Bruederle's decision.

"The economics minister is leaving Opel staff standing in the rain, counter to the facts and counter to the interest of the plants in Germany," Franz said.

Chancellor Angela Merkel, who has supported aid for Opel, said Wednesday that "the last word on the future of Opel has not been spoken," adding that she would speak to state leaders Thursday about how to help the automaker.